Tata Steel to raise Rs 3,000 cr via NCD

Tata Steel’s need for capital is hard to satiate. The company, after its Rs 3,477 crore follow-on public offer (FPO), has secured commitments from investors to raise another Rs 3,000 crore through a private placement of non-convertible debentures (NCD), in two tranches.

Group CFO, Tata Steel, Koushik Chatterjee told Business Standard, “The interest rate for this Rs 3,000 crore NCD will be a ballpark of 9-9.75 per cent and it will mature after 20 years.” A part of this secured commitment had been raised in January for the Jamshedpur project and will continue as and when the need arises.

“The idea is to move from high cost debt to a low cost one and with a better tenure,” he said. The company is now focusing on loan products that would give it a flexibility to repay over a long period of time, preferably 20 years, like in the case of this recent NCD.

On a further fund raising of $500 million through a perpetual bond issue, which ideally is a very long-term bond with interest payments that go on forever, Chatterjee said, “Nothing is on the table right now.” However, sources say the company is looking to raise this sum through a long-term bond placement.

The company may launch the issue in the next three to six months. Sources said the company was looking to raise the money from international market and will bear an interest rate of around nine per cent.

Chatterjee made it clear that the Rs 3,000 crore NCD will be used entirely for the capital expenditure of Jamshedpur and Orissa. “Immediate focus is Jamshedpur expansion and commissioning and post that, the funding of the Orissa plant,” he said.

Managing director Hemant Nerurkar, while giving an update on the construction of the Orissa plant, said, “Three-fourth of the total land requirement for the project is under our control and we have already built the boundary wall and fences around it. The rest we will soon acquire.” He added that the land in the company’s control was good enough to build the entire 6 million tonne capacity.

The company has altered the debt to equity ratio of its Rs 16,000 crore project in a way that it could use up some of the debt tied up for Jamshedpur for its upcoming Rs 23,000 crore Orissa steel plant. Chatterjee, on January 18, had told Business Standard that the company will be drawing up a debt of Rs 6,000 crore as against the limit of Rs 11,000 crore. He had said the remaining Rs 5,000 crore will be used in the Orissa project. “The 2:1 debt-to-equity ratio for the Jamshedpur expansion was decided at the peak of the crisis. Now, we are looking to invest Rs 1,870 crore from the FPO money into the Jamshedpur expansion, taking the total equity investment close to Rs 9,000 crore. Therefore, the debt-to-equity ratio comes below 1:1 from 2:1, earlier,” Chatterjee had said.